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SB 442: FINANCIAL ASSURANCE FOR ABANDONED OIL WELLS

An Act Relating To Oil And Gas; Amending A Section Of The Oil And Gas Act To Provide For Blanket Financial Assurance On Any Well Held In Temporarily Abandoned Status For More Than Two Years; Declaring An Emergency.

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MILD SB 442
FINANCIAL ASSURANCE FOR ABANDONED OIL WELLS

Legislative URL:
SB 442 on nmlegis.gov
Emergency Clause:
Yes
Germane:
N/A
Location:
Signed
Action:
[5] SCONC/SJC-SCONC [15] DNP-CS/DP-SJC [30] DP/a [41] PASSED/S (40-0) [43] HJC [46] DP [47] PASSED/H (59-1) SGND BY GOV (Apr. 8) Ch. 99.
Issue(s):

Companion Bills

Bills:
FINANCIAL ASSURANCE FOR ABANDONED OIL WELLS

Related Legislators

Bill Sponsor:

Related Documents

Downloads:
Introduced
SCONC Committee Report
SCONC Committee Substitute
SJC Committee Report
Final Senate Vote
HJC Committee Report
Final House Vote
Fiscal Impact Report
Final Version
Summary

Under current law, in order to operate oil, gas or service wells in New Mexico, financial assurance is required in the form of credit, cash, or surety bonds; these are basically an insurance policy to assure the well is plugged and abandoned according to OCD’s rules. One category of such assurance is called “blanket plugging finance assurance,” intended to cover plugging wells, if operators fail to do so.

 

This bill, with the emergency clause, provides that the Oil Conservation Division may allow an operator to increase its blanket plugging financial assurance to cover wells held in temporarily abandoned status, and that, if an operator elects to increase its blanket plugging financial assurance for wells held in temporarily abandoned status, the blanket plugging financial assurance amount shall be increased to $150,000 for the first 5 wells, $300,000 for 6 to 10 wells, $500,000 for 11 to 25 wells and $1,000,000 for more than 25 wells. At the time an operator posts blanket plugging financial assurance, an operator may increase its blanket plugging financial assurance to cover wells held in temporarily abandoned status and wells it anticipates holding in temporarily abandoned status at some point in the future.

A possible benefit of this bill might be that it is more likely that the financial assurance will be adequate to cover the eventual cost of plugging the temporarily abandoned oil and gas wells if operators choose to increase their coverage. A concern might be whether the increased blanket plugging financial assurance amounts are sufficient.

 

The Senate Conservation Committee Substitute for SB 442 provides that the Oil Conservation Division shall (instead of may) require a one-well financial assurance on any well that has been held in a temporarily abandoned status for more than two years, or, at the election of the operator, may allow an operator to increase its blanket plugging financial assurance to cover wells held in temporarily abandoned status. The SCC Substitute does not include any of the original bill’s language specifying financial assurance dollar amounts.

 

On March 11th the Senate Judiciary Committee amended SB 442CS to provide that the required dollar amounts of blanket plugging financial assurance for temporarily abandoned status wells will be set by rule at amounts greater than $50,000.

 

A potential benefit of the substitute may derive from its requiring the one-well financial assurance or increase to the blanket plugging financial assurance and the additional protection that the requirement may provide. A concern regarding the substitute might be that, except by setting a minimum as noted in the amendment, it does not include the dollar amounts.